Nuvoco Vistas hits new high, trades above issue price for first time

Shares of cement manufacturer Corporation (NVCL) hit a new high of Rs 577.50, up 3 per cent on the BSE in Monday’s intra-day trade. The stock for the first time crossed its issue price of Rs 570 since listing.

The company had made a weak stock market debut on August 23, 2021, as the shares got listed at Rs 471, 17 per cent below its issue price on the BSE.

NVCL, part of the Nirma Group, is the fifth largest cement company in India (4.2 per cent of the total capacity) and the largest cement company in East India in terms of capacity. It is also one of the leading ready-mix concrete manufacturers with 49 ready-mix concrete (RMC) plants across India. As of March 2021, it had a total installed cement capacity of 22.32 MT with 11 plants (eight in east, three in north). It also has 151.2 MW power plants (105 CPP, 44.7 MW WHRS and 1.5 MW solar), which caters to 50.4 per cent of its power requirements.

In the last five years, the central (Uttar Pradesh, Madhya Pradesh) and eastern (Odisha, Bihar, West Bengal) regions have exhibited strong demand led by a surge in infrastructure construction and rural housing. However, the southern region suffered sluggish growth in demand on account of continued capacity additions in the region, the stalling of construction activities in Amravati and Polavaram in AP-Telangana and sand unavailability in the region post-new sand mining laws.

Meanwhile, NVCL on September 1, 2021, inform the stock exchanges that CRISIL Ratings has revised its rating outlook on the long-term bank facilities and debt instrument of the company to ‘Stable’ from ‘Negative’ while reaffirming the CRISIL AA/CRISIL AA- rating and has reaffirmed its ‘CRISIL A1+’ rating on the short-term bank facilities and commercial paper.

The rating action follows the expected improvement in the financial risk profile of NVCL and financial flexibility with the on account of ongoing deleveraging from the proceeds received with the initial public offer (IPO) of NVCL.

The group had raised about Rs 5,000 crore in the IPO which included an offer for sale (OFS) of around Rs 3,500 crore and fresh equity issuance of Rs 1,500 crore. While the proceeds from the OFS will be primarily utilised for debt reduction at Nirma and Niyogi Enterprises Pvt Ltd, NVCL plans to repay Rs 1,350 crore of external debt from the Rs 1,500 crore proceeds received through fresh equity issuance, CRISIL Ratings said in rationale.

The rating agency further said the company also benefits from its strong market position in Eastern India, diversification in North India and sound operating efficiency with above-average per tonne operating profitability; this is expected to improve the cash flow.

“Cost optimisation initiatives (including the setting up of captive power plants [CPP], waste heat recovery systems [WHRS] and debottlenecking of current capacities) in the ongoing business and expected ramp-up of acquired assets along with deal synergies (product premiumisation and logistic synergies) shall also support the cash flow. NVCL enjoys healthy financial flexibility being part of the Nirma group,” it added.

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